Study projects steepest fall in tax receipts since 1932

WASHINGTON — The recession is starving the government of tax revenue, just as the president and Congress are piling a major expansion of health care and other programs on the nation's plate and struggling to find money to pay the tab.

The numbers could hardly be more stark: Tax receipts are on pace to decline 18 percent this year, the biggest single-year decline since the Great Depression, while the federal deficit balloons to a record $1.8 trillion.

Other figures in an Associated Press analysis underscore the recession's impact: Individual income-tax receipts are down 22 percent from a year ago. Corporate income taxes are down 57 percent. Social Security tax receipts could drop for only the second time since 1940, and Medicare taxes are on pace to drop for only the third time.

The last time the government's revenues were this bleak, the year was 1932 in the midst of the Depression.

The national debt already exceeds $11 trillion. And bills recently completed by the House would boost domestic agencies' spending by 11 percent in 2010 and military spending by 4 percent.

AP analyzed annual tax receipts dating to the inception of the federal income tax in 1913. Tax receipts for the 2009 budget year were available through June. They were compared to the same period last year. The budget year runs from October to September, meaning there will be three more months of receipts this year.

A small part of the drop in tax receipts can be attributed to individual and corporate tax credits enacted in February as part of the $787 billion economic-stimulus package. The sheer magnitude of the decline, however, points to the deep recession that is reducing incomes, wiping out corporate profits and straining government programs.

Social Security tax receipts are down less than a percentage point from last year, but the government in May projected a slight increase.

President Obama has said he wants to tackle Social Security next year, after overhauling health care, addressing climate change and imposing new regulations on financial companies.

Medicare tax receipts also are down less than a percentage point for the year, pretty close to government projections. Medicare started paying out more money than it received last year.

Meanwhile, the recession is taking a toll on fuel and industry excise taxes that pay for highway, mass-transit and airport projects. Fuel taxes that support road-construction and mass-transit projects are on pace to fall for the second consecutive year. Tax receipts on jet fuel and airline tickets also are dropping, meaning Congress will have to borrow more money to fund airport projects and the Federal Aviation Administration.

Congress voted last week to spend $7 billion to replenish the highway fund, which otherwise would run out of money in August. Congress spent $8 billion to replenish the fund last year.